Bray builds up on foreign funds to tap into global gains

New Star Equity Income fund manager Tim Bray has been adding foreign names to the fund since taking control late last year.

He took over from Toby Thompson in November. At that point the fund was entirely invested in UK equities. It now has 12% in overseas stocks. Bray is using ideas from colleagues he works with on globally invested institutional mandates where he also manages UK equities.

The fund manager, who eventually wants 17% of the portfolio in overseas stocks, says “I have been buying overseas names, which look more attractive than UK stock.”

This shift is noticeable in his choice of oils. He has bought into France’s Total and Italian company Eni, which could be taken over. He says: “They are a bit more interesting than owning BP.”

Bray has also bought French building materials company Lafarge and Greek gaming operator OPAP. Other changes include reducing the number of stocks held in the portfolio. When he took over from Thompson, who managed the fund after New Star acquired it from Aberdeen last January, it had 75 holdings. This is set to drop to around 50: “I want to focus the portfolio on ideas I have conviction in rather than spread them too far.”

Bray is also increasing exposure to the oil sector overall. He has added to Eni, Total and Shell, which was his second-largest holding in December: “Demand from the developing world has come in higher than expected. It has taken longer for Iraqi production to come back on stream and Opec is controlling the price pretty well.”

And he is upbeat on the future for oil prices, which are currently high: “Everyone has been talking about the effect of China’s industrial revolution on base metal prices. But if you get lots of Chinese people going out and buying new cars, you are going to need a few more countries like Saudi Arabia.”

Bray is keen on Asia. He likes banks exposed to the region, including Standard Chartered and HSBC, which was his largest holding in December. He says Asia is attractive because the global economy has excess liquidity: “What tends to happen in such conditions is this liquidity finds its way into the high-beta areas, where you get speculative advances in prices. This tends to be in the Asian markets, which have higher beta in general.”